Base rate remains low

Interest rates will remain at their historic low of 0.5 per cent into next year, the Bank of England has said.

The bank?s monetary policy committee made the widely expected decision at its latest meeting.

The base rate has been at 0.5 per cent since March 2009 and shows no signs of rising yet.

And while savers won?t be thankful, those with mortgages will. The Bank of England feel that the economy is not ready for a base rate increase and hope the low figure will continue to help those with mortgages stay in their houses.

Rates of repossessions have not been as high as in previous recessions and it is thought that the 0.5 per cent rate is one reason why.

It was also decided to keep the Bank of England's asset-purchasing budget at ?375 billion ($601 billion).

The housing market and, by association, the mortgage market is of crucial importance to the wider economy.

Therefore the government has a magnifying glass held over those sectors and it is motivated to help.

This applies also to the construction industry and. it is hoped that house-building will increase.

Ross Walker, chief UK economist at the Royal Bank of Scotland, said that the policymakers "have a bit of a balancing act at the moment" due to the fact inflation is "a little bit above its target" and is expected to remain there for several months.

Max Erskine from mortgagerate247.com said: ?The reduction of the base rate to its historic low of 0.5 per cent was an important part of reducing the effects of the recession.

?It meant fewer mortgage-holders lost their homes and it is still a crucial part of the strategy during these austere times.?

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